The commercial real estate landscape in the North and Central New Jersey office markets is undergoing a metamorphosis, with major occupiers expanding, consolidating, or investing in their own sites, according to new research from Colliers International. In fact, two large-scale redevelopment projects, a major expansion, and tax incentive grants played a significant role in this sector as the overall demand for space remained steady in the second quarter of 2014.

The overall availability rate for Northern and Central New Jersey was 20.3 percent at the end of the second quarter, up slightly from 20.2 percent from the previous quarter. Net absorption was negative 729,339 sf, a significant change from 560,125 sf of positive absorption last quarter. This decrease nearly matched the negative 738,696 square feet of net absorption experienced in the fourth quarter of 2013.

Despite negative absorption, the overall average asking rent for Northern and Central New Jersey combined increased to $24.07/sf in the second quarter of 2014, up slightly from $23.89/sf in the first quarter. This is only the second time average asking rents have broken $24/sf since the third quarter of 2012. The average asking rent for Northern New Jersey remained at $24.90/sf in both the first and second quarters of 2014, while it increased in Central New Jersey to $23.10/sf, up slightly from $22.79/sf in the first quarter.

This increase was attributed primarily to the reintroduction of a 301,800-sf building at 211 Mount Airy Road in Basking Ridge. The property, formerly occupied by Avaya, was sold to Onyx Equities, which is doing major renovations and brought the asset back on to the market as a multi-tenant building for $27.50/sf.

Northern New Jersey reported approximately 1.8 million sf of leasing activity in the second quarter, up from approximately 1.6 million sf in the first quarter (although down from approximately 1.9 million sf a year ago).

Central New Jersey’s leasing activity increased to 968,534 sf, up from 810,156 sf last quarter, but paled in comparison to 1.5 million sf a year ago, as landlords withdrew several spaces from the market, including: 81,326 square feet at 504 Carnegie Center in Princeton; 77,000 sf at 5000 Hadley Road in South Plainfield; and 47,486 sf at 3600 Route 66 in Neptune.

The largest redevelopment project announced in the second quarter by The Rockefeller Group, in conjunction with K. Hovananian Homes, will redevelop the 147-acre, 28-building Honeywell Campus (101 Columbia Road in Morris Township). Upon completion, the 1.2 million sf campus will include 900,000 sf of office and lab space, 235 townhomes, a community center, and open space.

The second largest redevelopment in the second quarter, completed by Dress Barn’s parent company Ascena, renovated the 145,000-sf former Footstar headquarters building at 933 MacArthur Boulevard in Mahwah and added on a 50,000-sf expansion, connected by an enclosed walkway. Ascena received a Grow New Jersey 10-year, $32.4 million tax credit incentive and is currently seeking LEED gold certification for this redevelopment project on its new headquarters.

Further, the New Jersey Economic Development Authority announced that three additional office occupiers were awarded 10-year tax incentive packages. They were given to: JP Morgan Chase, to retain 2,612 jobs and create 1,000 jobs in the state; Unilever, for the renovation of its 420,000-sf Englewood Cliffs headquarters; and RBC, for the renovation of its 207,000-sf Goldman Sachs building in Jersey City.

Celgene, a biotechnology company that manufactures drug therapies for cancer and inflammatory disorders, broke ground on the largest build-to-suit of the quarter totaling 550,000 sf, at the former Celanese campus at 80-90 Morris Avenue in Summit. The building will complement the 400,000-sf office building already at the site.

“This continued wave of redevelopment and expansion demonstrates the long-term commitment that occupiers are making to North and Central New Jersey,” said Robert R. Martie, Executive Vice President NJ Region for Colliers International. “Viable spaces in the market and the state’s tax incentives have influenced their continued presence and growth, which is vital to the state’s employment outlook and economy.”

Meanwhile, the coldest winter since 2003 took a toll on the New Jersey economy, as total non-farm employment only started to surpass last year’s levels starting in April and May of 2014. Employment figures in April and May 2014, as reported by the U.S. Bureau of Labor Statistics, showed a minor increase to 3,917,200 and 3,960,200 jobs, respectively, from 3,914,400 jobs in May 2013 and 3,955,700 jobs in April 2013.

NJ Advance Media LLC —a new company that provides content, advertising, and marketing services to NJ.com, The Star Ledger, and other NJ newspapers—leased 30,383 sf at 485 Route 1 South in Iselin. KBS, the asset’s owner, recently renovated the building’s climate control systems, roof, and elevators.

NY Life, a 170-year-old insurance company with 2013 earnings of $1.76 billion, renewed its lease and expanded to 25,000 sf at 379 Thornall Street in Edison.

About Colliers International

Colliers International is a global leader in commercial real estate services, with over 15,800 professionals operating out of more than 485 offices in 63 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.